Charter Hall Retail Reit · ASX:CQR
Charter Hall Retail Reit — H1 FY2018 Earnings Presentation
44 slides from Charter Hall Retail Reit's earnings presentation, Feb 19, 2018
Slide 1: FY18 half year results
For personal use only 19 FEBRUARY 2018 Charter Hall Retail REIT FY18 half year results
Slide 2: Agenda
Agenda For personal use only 01 Highlights and Strategy 02 Financial Performance Greg Chubb Retail CEO and Executive Director 03 Operational Performance 04 Outlook Christine Kelly Head of Retail Finance and Deputy Fund Manager 05 Annexures FY18 Half Year Results 1
Slide 3: Highlights and Strategy
Lake Macquarie Fair, NSW Artist Impression For personal use only 01 Highlights and Strategy FY18 Half Year Results 2
Slide 4: Key Achievements
Key Achievements For personal use only Half year ended 31 December 2017 +4.1% Majors MAT growth +1.5% $229.8 1 NTA growth Divestments of lower per unit million growth centres 3 +2.3% MAT growth 2 +1.3% LFL 2 NPI growth $215.5 million Total acquisitions Key metrics 1H 18 1H 17 Movement Operating earn
Slide 5: REIT Strategy
REIT Strategy For personal use only The leading owner and manager of convenience based retail KEY DRIVERS Active asset Enhance Prudent capital management portfolio quality management Maintain strong tenant relationships Active portfolio curation Sustainable payout ratio Enhance the overall experienc
Slide 6: Strategy Execution
Strategy Execution For personal use only Active asset Enhance Prudent capital management portfolio quality management -S table occupancy at 97.8% - Portfolio valued at $2.9 billion, - Weighted average debt a 5.2% increase over the period maturity of 5.6 years - LFL1 NPI growth of +1.3% - Acquired Sa
Slide 7: Financial Performance
Lansell Square, Vic For personal use only 02 Financial Performance FY18 Half Year Results 6
Slide 8: Operating Earnings and Distributions
Operating Earnings and Distributions For personal use only 1 H 18 operating earnings in line with market guidance $m 1H 18 1H 17 Net property income 80.1 74.4 T otal NPI and JV income has increased +6.2%, driven by same property NPI growth of +1.3% and the impact of Net income from joint ventures 7.
Slide 9: Balance Sheet
Balance Sheet For personal use only Property portfolio increased by $143 million over the $m Dec 17 Jun 17 6 month period due to: Cash 10 59 – Acquisitions net of divestments 1 of $73 million Investment properties 2,520 2,367 Investment in joint ventures2 246 250 – Development and capital expenditur
Slide 10: Valuations
Valuations For personal use only 36% of the portfolio by value was externally revalued Total ($m) at 31 December 2017 (52% at 30 June 2017) 30 June 2017 portfolio value 2,764 Property values on a like for like basis increased by Net transactions 73 $42 million representing +1.5% growth over the whol
Slide 11: Capital Management
Capital Management For personal use only Repaid and cancelled $50 million debt facility maturing in July 2018 RP2 JV bank debt facility upsized and extended to FY22 No debt maturing until FY21 Debt maturity profile Key metrics Dec 17 Jun 17 400 Weighted average cost of debt1 3.8% 4.0% Weighted avera
Slide 12: Capital Transactions
Capital Transactions For personal use only Strategy of enhancing the REIT’s portfolio quality by recycling out of lower growth properties into higher growth properties Requirement that all assets are the dominant convenience based shopping centre within their catchment Average size of assets sold ar
Slide 13: Operational Performance
Secret Harbour Square, WA For personal use only 03 Operational Performance FY18 Half Year Results 12
Slide 14: Portfolio Summary
Portfolio Summary For personal use only T otal MAT growth 1 of +2.3% driven by majors (+2.8%) and Asset value by state mini-major (+3.3%) tenants ACT Other SA 4% 1% 5% esfarmers and Woolworths stores in turnover delivered W +4.1% MAT growth WA 15% L ike-for-like NPI growth has improved 30bps to +1.3
Slide 15: Portfolio Tenant Composition
Portfolio Tenant Composition For personal use only Top 10 retail groups2 Wesfarmers and Woolworths businesses represent 48% of rental income 3% of rental income is generated from 9 convenience based non-discretionary retailers 1 Woolworths 25.1% Wesfarmers 22.6% Australian Pharmaceutical Industries
Slide 16: Supermarkets
Supermarkets For personal use only 7 6% of major tenant rental income generated +2.9% MAT growth 51% by supermarkets Supermarkets in turnover 1 S upermarket MAT increased strongly with higher customer visitation, offset by ongoing price deflation Increased Aldi supermarket representation (now 7th la
Slide 17: Specialty Tenants
Specialty Tenants For personal use only Rental income by tenant type Specialty MAT by category Non sales reporting1 Mini-majors Jewellery 4% Homewares 1% 19% 10% Food & Clothing and catering 37% apparel 10% Mobile phones 7% Leisure 7% Retail services 11% Sales reporting specialties 71% General retai
Slide 18: Tenant Customer Focus
Tenant Customer Focus For personal use only Positive year on year increases in all How tenants view Charter Hall Retail areas of relationship satisfaction1 Tenant customers rate their relationship with Charter Hall Retail as positive Committed 7 0% of specialty tenants intend to renew to long term t
Slide 19: Redevelopments
Redevelopments1 ($70m committed, $160m pipeline) For personal use only FY18 FY19 FY20 FY21 Wanneroo $11m Lake Macquarie $59m Allenstown Allenstown $30m Bateau Bay $15m Carnes Hill $65m Erindale $50m Lake Macquarie Underway/Approved Opportunities Wanneroo Bateau Bay Erindale Carnes Hill Erindale 1. C
Slide 20: Sustainability
Sustainability For personal use only L ED upgrades resulting in 1.5 GWh savings in energy. Further projects being undertaken 50kWh solar system fully operational at Singleton Square 2 with positive economic contribution Investigating solar energy projects with the aim of concurrent 3.75 Star average
Slide 21: Outlook
Bateau Bay Square, NSW For personal use only 04 Outlook FY18 Half Year Results 20
Slide 22: Retail Environment Outlook
Retail Environment Outlook For personal use only Annual sales growth1 Supermarket sales maintain their steady and consistent sales growth without the volatility 6.0% attached to clothing and department stores 5.0% 4.0% 3.0% 2.0% Clothing and apparel and household goods along 1.0% with department sto
Slide 23: FY18 Summary and Outlook
FY18 Summary and Outlook For personal use only Portfolio positioned for growth – Supermarkets sales will continue to remain strong, underpinning financial performance – Continue to actively manage the portfolio for convenience, curating the tenancy mix towards food and non-discretionary needs, offse
Slide 24: Annexures
Brickworks Marketplace, SA For personal use only 05 Annexures FY18 Half Year Results 23
Slide 25: Annexures contents
Annexures For personal use only 01 Reconciliation of statutory profit to earnings 08 Lease expiry profile 02 Reconciliation of statutory profit to FFO and AFFO 09 Property valuations 03 NTA and operating earnings reconciliation 10 Typical lease structures 04 Investment in joint ventures 11 Specialty
Slide 26: Reconciliation of statutory profit to earnings
Annexure 1 For personal use only Reconciliation of statutory profit to earnings Dec 2017 Dec 2017 Dec 2017 Dec 2016 Unrealised & (All Values in $m) Statutory profit Operating earnings Operating earnings capital items Share of profits from investment in JV’s Net property income – Sub-regional 8.5 - 8
Slide 27: Reconciliation of statutory profit to FFO and AFFO
Annexure 2 For personal use only Reconciliation of statutory profit to FFO and AFFO 1H 18 ($m) 1H 18 (cpu) Statutory profit 80.8 19.96 Revaluation increment on investment properties (27.3) (6.74) Net loss on derivative financial instruments 2.7 0.67 Loss on sale of investment properties 3.2 0.79 Wri
Slide 28: NTA per unit reconciliation
Annexure 3 For personal use only NTA per unit reconciliation $4.13 $0.01 ($0.01) $0.06 $4.19 NTA at Operating earnings Derivative MtM Property revaluation NTA at 30 Jun 2017 (net of distribution) movement uplift 31 Dec 2017 Operating earnings to operating cash flows reconciliation $61.9m ($9.1m) $52
Slide 29: Investment in joint ventures – balance sheet breakdown
Annexure 4 For personal use only Investment in joint ventures – balance sheet breakdown $m 1H 18 1H 17 Movement Investment properties 387 397 (2.5%) Borrowings (137) (139) (1.4%) Net other (4) (8) (50.0%) Investment in joint ventures 246 250 (1.6%) FY18 Half Year Results 28
Slide 30: Debt maturities and covenants
Annexure 5 For personal use only Debt maturities and covenants Limit Drawn Rate Maturity Financial Covenant Actual Post refinance initiatives ($m) ($m) convenants JV debt – CHRP1 110.0 90.9 Floating Jun-22 LVR ICR 55.0% 2.0x 33.3% 3.9x JV debt – CHRP2 49.9 47.5 Floating Nov-21 LVR ICR 60.0% 1.5x 43.
Slide 31: Pro-forma gearing at December 2017
Annexure 6 For personal use only Pro-forma gearing at December 2017 (post all contracted asset disposals) Balance sheet 45.0% 40.0% 5.3% (2.8%) (2.1%) 35.0% 33.9% 33.1% 0.4% (0.3%) 0.3% 30.0% 25.0% As at 30 June 2017 Capital Investment property Share buyback Acquisitions Asset disposals Contracted P
Slide 32: Current redevelopments
Annexure 7 For personal use only Current redevelopments Project Stabilised Forecast Description Status Project cost ($m)1 yield2 completion3 Lake Macquarie Fair, 59 6.9% March 19 Demolition of Mount Hutton The Principal Contractor commenced construction in NSW Plaza and construction of a new Septemb
Slide 33: Lease expiry profile
Annexure 8 For personal use only Lease expiry profile Major tenant expiry 80% 70% 68.2% 60% 10.8 50% Major tenant WALE 40% years 30% 20% 10% 7.4% 5.1% 6.6% 6.6% 1.8% 0.7% 2.1% 1.5% 0% FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26+ Portfolio W ALE of 6.7 years Specialty tenant expiry 30% 25% 20% 17.6%
Slide 34: Property valuations as at December 2017
Annexure 9 For personal use only Property valuations as at 31 December 2017 State Property Location Ownership interest % Book value ($m) Cap rate ACT Dickson Woolworths Dickson 100.0% 19.0 5.75% Erindale Shopping Centre Wanniassa 100.0% 39.0 6.50% Manuka Terrace Manuka 100.0% 60.1 5.75% ACT total 11
Slide 35: Property valuations as at December 2017
Annexure 9 For personal use only Property valuations as at 31 December 2017 State Property Location Ownership interest % Book value ($m) Cap rate NSW Salamander Bay Salamander 100.0% 174.5 6.00% Singleton Square and Plaza Singleton 100.0% 120.0 6.34% Sunnyside Mall Murwillumbah 100.0% 49.1 6.50% Tam
Slide 36: Property valuations as at December 2017
Annexure 9 For personal use only Property valuations as at 31 December 2017 State Property Location Ownership interest % Book value ($m) Cap rate SA Brickworks Marketplace Torrensville 50.0% 33.0 6.50% Southgate Square Morphett Vale 100.0% 78.0 6.25% SA total 111.0 Vic Bairnsdale Coles Bairnsdale 10
Slide 37: Typical lease structures
Annexure 10 For personal use only Typical lease structures Attributes vary across different leases however key characteristics of supermarket and specialty leases are outlined below: Supermarket tenant leases Specialty tenant leases Lease term 15 years with options Typically average 5 years Rent Bas
Slide 38: Specialty sales performance and portfolio metrics
Annexure 11 For personal use only Specialty sales performance and portfolio metrics Portfolio by asset type # Value ($m) GLA (‘000sqm) Occupancy1 Sub-regional shopping centres 21 1,579 367.8 97.8% Neighbourhood shopping centres 34 1,157 217.5 97.4% Freestanding supermarkets 11 171 35.9 100.0% Total
Slide 39: Portfolio historical performance
Annexure 12 For personal use only Portfolio historical performance Proven and consistent performance over time Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Number of properties 78 73 76 74 72 71 66 Occupancy 98.5% 98.4% 98.4% 98.0% 98.0% 98.0% 97.8% Same property NPI growth 3.4% 2.4% 2.4% 2.2% 2
Slide 40: Specialty sales reconciliation
Annexure 13 For personal use only Specialty sales reconciliation C QR has historically reported its specialty sales category to include any specialty tenant up to 700sqm.To move in line with Shopping Centre Council of Australia guidelines, CQR will be moving to reporting specialty sales on all speci
Slide 41: Glossary
Annexure 14 For personal use only Glossary 1H 18 1 July 2017 - 31 December 2017 GLA Gross lettable area Gross rent Base rent and outgoings In Turnover Tenant is paying a percentage of sales in rent (turnover rent) MAT Moving annual turnover – calculated as a sum of rolling 12 month sales Occupancy c
Slide 42: Further information
Further information For personal use only Greg Chubb Christine Kelly Philip Cheetham Retail CEO and Executive Director Head of Retail Finance and Head of Listed Investor Relations Deputy Fund Manager CQR Charter Hall Retail REIT Charter Hall Retail REIT Charter Hall T: +61 2 8651 9355 T: +61 2 8651
Slide 43: Important notice
Important notice For personal use only Charter Hall Retail Management Limited ABN 46 069 709 468; AFSL exclude all liability for any loss or damage suffered or incurred by any 246996 (“CHRML”) has issued this presentation in its capacity as person as a result of their reliance on the information con
Slide 44: For personal use only
For personal use only Melbourne Sydney Head Office Level 18, 570 Bourke Street, Level 20, No. 1 Martin Place, Melbourne, Vic, 3000 Sydney, NSW, 2000 T: +61 3 9903 6100 T: +61 2 8651 9000 Perth Brisbane Level 5, St Georges Square, Level 22, Northbank Plaza, 225 St Georges Terrace, 69 Ann Street, Pert
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